Analysts say it is not unusual for the government to investigate the pricing practices of Chinese and international companies. Although most prices in China are set by market forces, the government maintains control over large parts of the economy, including energy and telecommunications prices.

The government closely monitors health care costs, including the prices of certain types of drugs. With costs skyrocketing, the price of infant milk formula has recently become a growing concern in China, partly because of worries about the quality and safety of domestic brands.

In response to the government investigation, several international brands, including Nestlé and Danone, have announced price cuts — as much as 20 percent — on infant milk formula sold in China.[Source]

The NDRC will examine 27 companies on cost issues and 33 for pricing. The investigation is to understand the cost and pricing situation within the companies, and to adjust drug prices in a timely manner, the agency said.

In addition to GSK and Merck, other foreign companies being investigated over costs include Astellas, Novartis’ generics unit Sandoz, Boehringer Ingelheim, Baxter International and Fresenius.

An investigation team from NDRC will visit the companies involved between July and October, the agency said.[Source]

But pharma groups should benefit as a larger chunk of China’s vast population gains access to their products. And longer term, there is the chance to improve profitability as more patented, innovative medicines are introduced to the market. Companies actively seek to get their patented drugs on another list eligible for partial reimbursement, argues Deutsche, despite the increased risk of unilateral price cuts. And new drugs are launched in China on average five to seven years after their international debut, a lag the government wants to remedy by encouraging local clinical and research investment.[Source]